Significant changes to the calculation of Queensland land tax liability were given the green light when the Revenue Legislation Amendment Act (Qld) 2022 was assented to on 30 June 2022. Changes to the Land Tax Act 2010 (Qld), which will impact Queensland landowners from 30 June 2023, mean assessment of Queensland land tax liability will take into account the value of interstate landholdings. Ultimately, this will mean an increase in land tax liability for anyone who owns land in Queensland as well as non-exempt property in another State or Territory.
Queensland land tax: the current position
The current position (which will remain in effect for the 2022/23 financial year) is that land tax liability is determined by reference to the taxable value of the land owned in Queensland as at midnight on 30 June each year, with different thresholds and rates applied to individuals, corporations, trustees and absentees and exemptions for certain classes of landholdings.
The new land tax system
From 30 June 2023, land tax will be imposed based on the Queensland proportion of the total value of the Australian land owned by the landholder. The total value of Australian land includes both:
the taxable value of Queensland land; and the statutory value of interstate land, being the relevant valuations applied under the relevant State and Territory legislation.
The existing land tax exemptions (including primary place of residence and primary production) will remain in place under the amended legislation. Note also that the increased tax liability in Queensland does not impact on any taxes payable in other States and Territories.
Working out land tax: an example
To illustrate the increase, we’ve considered the position for an individual who currently owns one property in Queensland with a taxable value of $745,000.00 and one property in New South Wales with a statutory value of $1,000,000.00.
Under the current arrangement, the individual will pay $1,950.00 in land tax this financial year in Queensland for the Queensland property. This liability is calculated at the second tier as set out in Schedule 1 of the Act ($500 plus 1.0c for each $1 more than $600,000 up to $999,999).
Using the same example in the 2023/2024 financial year utilising the new system, the same individual will pay $7,169.29 in land tax (an increase of over $5,200).
The new calculation is done in two steps:
first by applying the relevant general rate for an individual to the total value of all Australian land owned by the landholder to reach a gross rate (in this case the applicable rate being $4,500 plus 1.65c for each $1 more than $1,000,000, which for landholdings of $1,745,000 across the country amounts to $16,792.50); and
secondly, by applying this gross rate to the Queensland proportion of the total Australian land value.
i.e., the tax liability = $16,792.50 x ($745,000 / $1,745,000) = $7,169.29
To assist the Queensland Revenue Office in determining other Australian landholdings and the statutory value of those landholdings, amendments to the Act require Queensland landholders to provide further details by way of notice in an approved form (including property description, statutory value and interest) generally by 31 October each year or, if a Queensland assessment notice is issued before 31 October, within 30 days of receiving the assessment. Failure to comply with notification obligations will be an offence.
As the full force of the changes will not be felt until 2023, it is difficult to say whether the amendments to the Land Tax Act 2010 (Qld) will impact on investment habits or holdings in Queensland. However, we consider that it is likely that the increase in land tax will be felt by commercial tenants, as landlords seek to pass through their increased liability (where permitted by law) and we may see this point brought up in many lease negotiations going forward.